Lower mansion tax threshold could widen impact on homeowners

Lowering the proposed threshold for Labour's planned council tax surcharge on higher-value homes from £2m to £1.5m could bring significantly more homeowners into scope, Saltus has warned.

Following speculation that Andy Burnham could lower the proposed threshold if he were to become Prime Minister, Saltus argued the move could impact particularly retirees and those in London and the south east who are "asset-rich but cash-flow constrained".

Saltus chartered financial planner and partner, Alex Pugh, said many homeowners with properties valued at around £1.5m do not necessarily have substantial disposable income, as much of their wealth is tied up in their homes.

Consequently, an annual surcharge of several thousand pounds could make it harder for some, particularly those on fixed retirement incomes, to remain in their properties.

"A property should not be viewed in isolation, and homeowners should consider how their home fits alongside their pension arrangements, investments, income needs and longer-term plans," Pugh said.

"There is also a wider question around how improvements and extensions would be treated. If a high-value property surcharge were introduced, there would need to be clarity over whether significant improvements could trigger a new valuation and potentially bring more homes into scope."

Pugh argued that transparent valuation process and a clear appeals mechanism will be essential to ensure homeowners are treated fairly, particularly in cases where an official valuation pushes a homeowner above the threshold but the property would not actually achieve that price on the open market.

She said: "At the moment, there is still uncertainty around what that process would look like in practice."

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